THE EFFECT OF DEBT POLICY AND DIVIDEND POLICY ON FIRM PERFORMANCE MODERATED BY OVERINVESTMENT (Empirical Study on Manufacturing Companies Listed on Indonesia Stock Exchange 2017-2020)

Sania, Hani and Saiful, Saiful and Siti, Aisyah (2022) THE EFFECT OF DEBT POLICY AND DIVIDEND POLICY ON FIRM PERFORMANCE MODERATED BY OVERINVESTMENT (Empirical Study on Manufacturing Companies Listed on Indonesia Stock Exchange 2017-2020). Undergraduated thesis, Universitas Bengkulu.

Archive (Thesis) UNDERGRADUATE THESIS - HANI SANIA C1C018058_compressed.pdf - Bibliography Restricted to Repository staff only Available under License Creative Commons GNU GPL (Software). Download (924kB)

Abstract

Firm performance reflects the company's success which is measured every predetermined period. An important factor assessed by the firm performance is its financial performance. Financial performance reflects a company's ability to profit from assets, equity, and debt and the company's ability to meet its obligations when it matures. The performance results will help the company grow and determine the policies to be taken. Companies that use debt and cannot pay off debt will face liquidity threats that will ultimately threaten management positions as company managers and impact the firm's performance. Therefore, intensive supervision of debt policy is needed to align with the company's goal to improve the firm's performance. Furthermore, the greater the company's need for funds, the smaller the company's ability to pay dividends. However, if a company has excess funds, managers will tend to waste funds so that dividends that will be distributed are high. This will have an impact on a firm's performance. This study uses secondary data from manufacturing companies. The data used includes annual reports and annual financial statements for the 2017-2020 period obtained through the Indonesia Stock Exchange website and the websites of each company. The sample in the study was 113 manufacturing companies. The analytical methods used in this study are multiple linear regression models and Moderated Regression Analysis (MRA). The results showed that debt policy has a negative effect on firm performance. This shows that the higher the debt composition, the lower the firm's performance. Dividend policy has a positive effect on firm performance, and this shows that a higher dividend proportion will be followed by higher firm performance. Furthermore, this study shows that overinvestment moderates the effect of debt policy on firm performance. This means that the interaction between overinvestment strengthens the relationship between debt policy and firm performance. And then overinvestment moderates the effect of dividend policy on firm performance. This means that the interaction between overinvestment strengthens the relationship between dividend policy and firm performance. The theory tested in this study is agency theory. The results of this study can confirm agency problems can be caused by two things; the lack of supervision and excessive free cash flow. The limitations of this study have a problem in the research population of manufacturing companies is still relatively small to list companies that issue dividends consecutively and companies that experience overinvestment, so it is recommended to expand the research population, such as non-financial companies listed on the Indonesia Stock Exchange. And the advice for further research is recommended to add underinvestment research variables to advise investors and managers regarding the firm's performance in companies that are overinvestment and underinvestment.

Actions (login required)

View Item